Finance Lessons To Teach Your Son

3- You have to save money

Once you teach him the concept of “needs vs. wants,” you can move on to stress the importance of savings, specifically the importance of penciling in “savings” as an item in the “needs” section.

First tell him how important it is to have a short-term emergency savings account. If he has one, then it means that he won’t have to go into debt when his car breaks down, he loses his job or some other unforeseeable emergency happens to him. Then tell him that having a long-term savings account means he’ll be able to buy a house at an earlier age, start his own business before he has a family and be able to live comfortably when he’s his grandfather’s age.

Get him involved: Let him keep 1/3 of the money he makes from doing chores in a piggy bank in his room. But tell him you are going to keep track of the rest of the money with 1/3 going to an account that he can use for things while he’s still young and 1/3 going to an account that he can have when he turns 18. As these amounts grow larger, you can open up a savings account for him at the bank so he can track his money online.

4- You can’t spend what you don’t have

If you teach your son no other lesson (financial or otherwise), teach him this: Live within your means. Don’t spend more than you make. Most financial hardships come down to people not being able to abide by this one simple precept. If your son “gets it,” then you’ve done him a huge favor that he’ll thank you for later.

When people do spend money on things they can’t afford, they go into debt. And credit card debt can take years to pay off. If you can teach your son at an early age how credit card companies make money, he’ll probably have an edge on his peers when he gets to college.

Get him involved: Go back to your “needs and wants” columns. Ask him what happens if he is only earning $100 per month but he is spending $75 on both needs and wants. He’ll have to borrow the extra $50 — so after one year he’ll owe a credit card $600 plus interest. Use an online calculator to do a “time value of money” calculation that shows him how much debt you can run up when you’re using a credit card that charges 17% interest. Then show him how long it will take to pay it off if you only make the minimum payment. Make sure he understands that the more economical solution would be to cut $25 from the ”wants” column.

finance lessons to teach your son

If you want him to learn to hit a baseball, you don’t sit him down and describe Albert Pujols’ s swing. You take him in the backyard and pitch to him. It’s the same with money management. He’ll forget your lectures — but he’ll learn when you get him involved.